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Meet the mainstream
By Daniel M. Ryan
January 3rd saw the world-wide celebration of the 10th anniversary of Bitcoin's genesis block. It was the Bitcoin blockchain's 10th birthday. Ten years of explosive pell-mell growth and development of a digital frontier that's now recognized as Internet 3.0. Bitcoin is now used for remittances; it's seriously talked about as a store of value like gold. Blockchain technology is effecting a permanent revolution of finance. What began as an underground techno-libertarain experiment defiantly set against the fiat-money banking system now counts among its influencers Larry Summers, Ben Bernanke (for Ripple), Al Gore, Ralph Benko, and Sheila Bair. Until her recent resignation, Blythe Masters – the inventor of the first wave of financial derivatives – was a mover and shaker in the blockchain sector.
In one sense, the ten years of Bitcoin is like a compressed history of San Francisco from 1840 to World War 1: a small settlement to gold-rush boom town to sprawling growth to rapid development to modern-city regulation. But in another sense, its life track has been like the stereotypical Boomer: starting off adulthood throwing mud at limousines only to end up riding in one. When a history of cryptocurrency is written – what follows only scratches the surface – one theme will be the muting of the original ideals for practical and arguably responsible reasons. Though a world-historical success economically, there is an element of tragedy in the cryptocurrency story.
As was reported world-wide, Bitcoin's genesis block Jan 3, 2009, contained the famous headline from the Financial Times: "Chancellor [Alastair Darling] on brink of second bailout for banks." Although Satoshi Nakamoto included it to test Bitcoin's signed-message functionality, its text said volumes about the early adopters it would attract. Nakamoto announced it on a peer-to-peer programmers' group on Nov. 1, 2008, two days after self-publishing Bitcoin's white paper. He and Bitcoin attracted a then-small tight-knit group of supporters in 2009, including Nick Szabo and cryptographer Hal Finney. The latter received the first transfer of Bitcoin from Satoshi himself, and there were times in that year when he and Satoshi were the only ones keeping the blockchain going via mining. Sadly, Finney passed away in 2014.
Other supporters, who were just as crucial as the cryptographers and programmers, were libertarians. Brandon Smith, the proprieter of alt-market.com, was approached by two of them in late 2009. They urged him to join in and to push Bitcoin on his Website. He turned them down, and has had zero regrets about it. Whatever you think about his business acumen, he certainly stuck by his principles.
The next year saw the legendary sale of a pizza for 10,000 Bitcoins. This being the first sale, it was a trust-based exchange where the seller of the pizza used his credit card to order a pizza online for the buyer. At that time, there was no need for an escrower.
2010 was also the year that the first Bitcoin exchange, appropriately named bitcoinexchange.com, debuted. Mt. Gox, originally an exchange for Magic: The Gathering cards, switched to Bitcoin later that same year. Originally, both accepted PayPal. But Paypal refused to accept crypto as a legitimate good, so a scammy buyer could complain to PayPal, get his spend reversed, and keep his ill-gotten Bitcoin. Both exchanges got stung by this, so Mt. Gox switched to wire transfer. At that time, the owner of Gox was Jed McCaleb. The now-notorious Mark Karpleles didn't buy it until the next year.
Also in 2010, Satoshi went dark. His original code had been cleaned up and organized by Gregory Maxwell, Mike Hearn, Gavin Andreson and others who had formed the Github group Bitcoin Core. Before he vanished, Satoshi appointed Andreson as lead maintainer of Bitcoin's open-source code. To all appearances, Satoshi vanished because he thought his creation was in good hands and could thrive without him.
2011 saw the first wave of hackings. The hacking of Mt. Gox in May '11 was enough to kill the bull market and send Bitcoin into its worst bear market to date. Mt. Gox was wounded, but came back. Hackers killed some other exchanges outright, like Bitcoinica. They would kill quite a few more.
Portentously, Ross Ulbricht's Silk Road opened up in the dark web in February of 2011. It got noticed by a Gawker writer in June. Although Bitrcoiners didn't like this mentioned, the Silk Road was the venue that platformed the first regular use of Bitcoin as a currency. Buying the legal and illegal goods and services on Silk Road was the first use of Bitcoin in the way that Satoshi intended it to be used. This shouldn't be jimmie-rustling, as it encapsulates the Innovator's Dilemma. Disruptive technologies can't overturn niches occupied by incumbents because people are creatures of habit. A disruptive technology, even one clearly superior, has to establish itself in a niche that the incumbents deem to be too risky or seamy for them to exploit. Thusly, Bitcoin first came into its own as a currency as a medium of exchange for a niche that no payment processor would touch. We're seeing a recapitulation of this effect in the "dark ideas" sector. Bitcoin can't boot anyone off its platform, nor can it be deplatformed. Wikileaks had relied on Bitcoin donations since 2011, the year after it was deplatformed by PayPal. Now that the right and foes of the regressive left are being squeezed, they're turning to Bitcoin too. Blessedly and by design, cryptocurrency is opinions-agnostic.
2011 also saw the first innovative altcoin. Namecoin attempted to use its blockchain for an alternative DNS system using .bit as its top level domain. It didn't come to fruit, but it was a good try and proved to be a herald of more consequential innovations. A harbinger of another side of the altcoin space came with Tenebrix. This alt used used scrypt as its hashing instead of SHA-2. Its reason for being was the arrival of Bitcoin mining programs that could use graphics cards' Graphics Processing Units (GPUs.) Miners who preferred to use their CPUs were miffed at being outcompeted. Tenebrix, with a hashing function that would foul up the GPU mining programs, offered them a chance to stick with their CPUs. So a lot of miners loved it – until they found out that the dev of the coin secretly mined some himself before announcing it to the Bitcoin public. This cheating made Tenebrix the first altcoin scam.
The idea was good, though, so a dev by the name of coblee forked it into Fairbrix and guaranteed that there was no premine beyong a 100-block test run. Fairbrix was itself a test run for the now-venerable Litecoin, devved by the same Charlie Lee.
2012 saw Bitcoin recover from '11's vicious bear market. Word spread about it, and so did derision. It got nicknamed "Magical Internet Money."
'12 also saw the introduction of Ripple and XRPs. Ripple and the XRP tokens were a professional attempt to adapt blockchain technology to replace the '70s-era SWIFT system. Rather than battle the banks, Ripple aimed to work with them. It was the first platform to introduce in-blockchain tokens, or Assets, but these were not tokens in the cryptocurrency sense of the term. They were created by opening "trust lines." This procedure punted away the trust-free goal of cryptocurrency. Although Ripple's platform carried the first decentralized market, it was a market that traded those trust-line Assets. Unsurprisingly, it was controversial. Because of the trust factor and a ledger system dominated by Ripple Inc., many Bitcoiners insisted that it was not a cryptocurrency at all.
Despite this, it attracted a thriving community in '12 and '13. Although it was not included in Coimnarketcap.com's first lists of cryptocurrencies – it didn't show up until about August 11, 2013 – it's occupied the #3 or #2 slot since then, except for a brief slip to #6 in February 2014. It hit the big time in 2017 as the "legit" alternative cryptocurrency.
Silk Road's Ulbricht was busted by the FBI in 2013. By that time, Bitcoiners were looking at remittances as a use case and beginning to implement. Remittances, on a much larger scale than dark markets, saw Bitcoin and other cryptocuurencies being used as currencies. Nowadays, about 15% of all private remittances are sent with cryptocurrency. After the arrest, the U.S. Senate held a hearing on Bitcoin – and it was surprisingly favourable. Bitcoin leapt upwards in consequence, and the old-time crypto-libertarianism was on the slow road to being downplayed.
Although 2014 was ravaged by a bear market that was hard on Bitcoin and even harder on alternative cryptocurrenies, it proved to be the trial by fire that ensured Bitcoin and the others would be a permanent part of world finance. Not unlike 2018, 2014 saw a lot of goofiness, some scamming, but a lot of true grit. Before the slogan "bear markets are for building" was coined, faithful cryptonauts were living it in 2014 and 2015. Ethereum, the cryptocurrency that brought smart contracts into being, was the first professionally-run pre-sale: it set the standard for the post-boomtown age. Its blockchain hosts a huge number of Assets – known in Ethereum-speak as ERC-20 tokens - and serves as the platform for a host of start-ups. Back in 2014, funding for new cryptocurrenies came through pre-sales or through the devs' own pockets. Start-up money was only available for service builders like companies offering remittances with Bitcoin or a Bitcoin non-dark marketplace. Nowadays, there's venture capital aplenty.
Yes, the boom town has evolved into a thriving metropolis. Cryptocurrency is becoming mainstreamed. But in so doing, it's met the demands of the mainstream authorities. As renowned cryptoanarchist Tim May said in his last interview before his passing:
I can’t speak for what Satoshi intended, but I sure don’t think it involved bitcoin exchanges that have draconian rules about KYC, AML, passports, freezes on accounts and laws about reporting "suspicious activity" to the local secret police. There’s a real possibility that all the noise about "governance," "regulation" and "blockchain" will effectively create a surveillance state, a dossier society.
That's the tragedy of Bitcoin's world-historical success. One part of the tragic side is the fact that boom towns attract boom-town hustlers and boom-town hurry-overs. The other part is poignant. Through decisions entirely pragmatic and understandable, many of them motivated by a moral-obligation version of fiduciary duty, Bitcoin and the cryptocurrency sector has had to downplay its original ideals. Those ideals still live in muted form, but a pessimist would opine that they're headed to Rotary-Club lip service.
When you meet the mainstream, you meet the demands of the mainstream. And, as the last ten years have shown, the demands of the mainstream are quite different than the promises of crypto-anarchism. They may well be realized far off in the future, but not in the managerialist world of today.
Daniel M. Ryan, as Nxtblg, is spinning his wheels at Steemit.